It will be art and it will also, quite possibly, be terrifying - unless the feeling of paddling off the side of a building, or lying 20ft in the air on a transparent pillow, is one that fills you with joy. That's not to mention the spookiness of 200 internally lit dolls' houses in a dark room which has been torn apart by an unseen, but clearly furious, beast.

Yesterday the Hayward gallery in London had the builders in, the artistic ones. They included the British artist Mike Nelson taking an axe to walls he put up himself, Rachel Whiteread supervising electricians, and a Cuban art duo contemplating bricklayers on one side of the room and a stack of Ikea furniture on the other.

The artists are among 10 transforming the architecturally brutal, love-it-or-hate-it construct housing the gallery on the South Bank for its 40th anniversary summer show called Psycho Buildings.

The director of the Hayward, Ralph Rugoff, who admitted to a few sleepless nights, thinks it will be one of the most ambitious art shows ever seen in the capital.

With 12 days to go before opening, the Guardian was yesterday given a sneak preview of an exhibition exploring art and architecture, investigating reactions to space. "Architecture is usually functional and built to restrict the use of space," said Rugoff. "Some people say architecture is inherently totalitarian and fascistic and these artists are all trying to reinvent the space in all sorts of different ways."

Two of the gallery's outside terraces will also host installations, and organisers are expecting queues. The Austrian art collective Gelitin is turning one outside space into a boating pond on which people will be able to paddle in their own little vessels. The water will be the same level as the existing wall so it will look as if you can paddle right off the edge - although you won't, Rugoff assures visitors.

"There'll be people looking up from the Hungerford bridge and they'll just see heads moving, they won't know what they're doing."

The pastoral boating pond has to be imagined rather than seen at the moment and the same applies to the Argentine artist Tomas Saraceno's project. He is installing an outdoor dome structure with a transparent membrane - it will be like walking into a giant plastic pillow. When people look up they will be able to see not just the sky, but also the brave gallery-goers who have climbed to the top to lie on the pillow.

"It will be a pretty vertiginous experience," said Rugoff.

Inside the Hayward, behind doors aggressively signed "DO NOT ENTER", Nelson and his team have been taking an axe to the new wooden walls they have put up specially.

The installation is called To the Memory of HP Lovecraft, the subtitle of a story by the Argentine writer Jorge Luis Borges that was inspired by the US horror writer. "It's kind of a parody of a parody of a parody," said Nelson, standing in the room which is meant to look as it does: as if an angry imprisoned beast has torn it apart trying to get out.

"I'm sort of enjoying it. But you have to use an axe so it's quite exhausting, each mark is done by hand," he added, around him holes in the wall and splinters all over the floor as well as faeces of the beast.

Downstairs is another, if not terrifying, then definitely spooky scene. Whiteread is in charge of electricians and the installation of 200 dolls' houses, creating what will be a creepy model village. "I started collecting them 20 years ago and I've never really known why," she said.

The artist said she jumped at the chance to be part of the exhibition. "It's such a weird building and I think this is going to be a really great show. These things are always quite stressful though. It's easier when you're on your own in the studio."

The installations are being put in with the help of around 100 craftsmen and technicians and, in the German artist Michael Beutler's case, students. He has built his own loom-like machine to help create the tissue paper on chicken wire structures that will be an almost forest-like environment for people to walk through.

"He never knows what it's going to be until he's done it. The title isn't decided on until he's finished," said Rugoff.

In another room, cutouts of MDF are stacked up liked children's toys waiting to be put up. If some rooms are work in progress, Ernesto Neto's project is work still to be done. His MDF and Lycra double- humped dome will be like "being enveloped in a womb-like space", said Rugoff. He hopes being inside "will change the way people behave", that it will bring the inner child out in us.

The Korean artist Do-Ho Suh has two installations. One, inspired by The Wizard of Oz, will look like the house he grew up in South Korea crashing into a redbrick New England apartment block. "There'll be 2,000 interior components, every piece of wiring and plumbing is being specially made," said Rugoff. The other will be a large empty room glowing red.

Tobias Putrih, an artist from Slovenia, is using one of the Hayward's roof terraces on which he is building a 30-seat cinema.

In the room next to Whiteread, the Cuban artists Marco Castillo and Dagoberto Rodriguez, who make up Los Carpinteros, have bricklayers building a wall and a pile of furniture waiting to be installed. While it looked like a building site yesterday the end piece will look a bomb blast - an apartment caught mid-explosion.

· Psycho Buildings, the Hayward Gallery, London, from May 28 to August 25

Art of Experience

Art, increasingly, is not just something you look at. It is something you experience. Other exhibitions to transform the space they are in include:

·Tate Modern braved health and safety considerations when it allowed Carsten Höller to install helter-skelters in the Turbine Hall in 2006.

· The huge, curved sheets of steel of Richard Serra's The Matter of Time at Bilbao's Guggenheim made some visitors disconcerted, others feel good.

· Gregor Schneider's Haus Ur is most disturbing. It's an ongoing recreation of his parents' house you walk through feeling claustrophobia and fear.